Why Are Most Americans Only Three Weeks Away From Filing Bankruptcy?

In a recent study it showed that the average American is only weeks away from filing bankruptcy. If you watch the television it's pretty hard to believe this being true unless you do some research on your own. After digging deep into websites regarding facts and figures on the economy, it appears that this fact is closer to the truth than most would like to believe. Most Americans watch one of the morning news shows that are very light and run by the corporate media. The information that is broadcast is very generic and really could go either way depending on who was reporting on it. One thing that everyone doesn't argue about is the amount of debt that the US has now accumulated. The last time I checked the national debt was close to $16.4 trillion and growing. At the end of 2012, it was reported that the bankruptcy filing numbers have declined drastically meaning that the economy was in full recovery. From my perspective, just because something happens it takes a huge leap of faith to get to a recovery without looking at all the other numbers. After much research I came to the conclusion that we are living in a credit card economy. As long as Americans continue to have the ability to keep borrowing more money they won't file for bankruptcy.

To get an answer to the outcome you need to look at the why and how. Looking at the why, we can go back to 2010 when we saw a record number of Americans filing for bankruptcy to eliminate their debt. Coincidentally, right around that time the Fed introduced quantitative easing through QE1. Shortly after the introduction of a QE1 the stock market started rallying and small amounts of money started filtering into the economy. One year later, QE2 was introduced after a full year of printing money and pushing it out to the banks. Banks now having more liquidity started lending money again. Back in 2008, the banks removed all available balances on credit accounts and lines of credit to protect themselves from the massive liability outstanding. At this time, the money started flowing again and credit was once again given to just about anyone asking for it. Something else interesting happened, the number of Americans filing bankruptcy also declined. While all this was going on unemployment wasn't dropping making it very apparent that the quantitative easing was the only thing driving the economy. The same thing happened in 2012 and the Fed added QE3 and QE4. Looking at all this information we can come to the conclusion that we are living in the greatest debt bubble in the history of the world and at some point in time it will be game over.

Americans now believe the lie of living on Fantasy Island using their credit cards. Back in 2008, the average American had a consumer debt to income ratio of right around 50%. That number now is at 154%. This leads me to the conclusion that the economy is not getting better, the banks are just enabling overly indebted Americans to continue on living like a rock star. I guess we shouldn't expect more out of the average Joe when the government can't even balance their own checkbook. Before the Federal Reserve was created, the US had very little debt. Now, the debt is 5000 times larger than when it began. People are now borrowing themselves into oblivion when they should be talking to a bankruptcy attorney about filing bankruptcy. This will only go on for so long as this kind of lifestyle is completely unsustainable.

Tips for Successful Debt Negotiation

Sometimes the inevitable happens: No matter how cautious and organized you've been, you're going to fall behind on your bills. Whether it's because of a job loss, increased bills, or something completely unexpected, there are many reasons why you might fall behind on debt payments. When this happens, good money management might help you get back to financial security. However, this isn't always the case and sometimes more drastic actions are needed. To avoid severe consequences, it would be wise to begin negotiation efforts with your creditors.

Strategies for Debt Negotiation

When money management isn't enough to get the bills paid in their entirety, then it's time for debt negotiation. This will allow you to lower the overall amount due if your creditor approves. Properly approaching debt negotiation discussions increases the likelihood that the creditor will agree to your request.

1.Prioritize your debts. If you are going into debt negotiation for multiple accounts, you'll generally want to eliminate the lowest balances first. However, there are exceptions and certain types of debt are more important than others. For instance, you should always make a good effort to pay your mortgage over a credit card bill, if you ever have to decide between the two.

2.Double-check your ability to pay. There's nothing worse than making an offer to your creditor for debt negotiation, having it approved, then realizing that your offer is still too much for you to bear. By double-checking your ability to pay, you're ensuring that your negotiation actually works for you.

3.Don't get emotional. While you'll want to explain why you're facing financial hardships (job loss, medical expenses, etc.) avoid telling them your life story. Your creditors don't have a lot of sympathy and are ultimately looking at the bottom line.

4.Brag about your money management. If you've made a good faith effort to pay all your bills, be sure to mention your payment history and the clear effort you've made! This will make it easier during the debt negotiation process.

5.Consider mentioning bankruptcy. If you're considering bankruptcy, then mention it or hint that you're considering it. A bankruptcy means that you'll be discharged of the debt and that the debt is now the loss of the creditor. The creditor would rather lose some money through debt negotiation than the entire amount through bankruptcy.

6.Save money before debt negotiation. You'll want to practice good money management by saving enough cash to make a payment before you begin the debt negotiation process. However, do not stop making your current payments! Instead, save enough so that you can make a payment right away. Creditors are more likely to settle if a fund can be immediately transferred.

7. Record the phone call. Consider recording the phone conversation. Recording the conversation - and letting the debt collector know you're recording it - is a great way to keep them in line. Furthermore, you also have a record of the phone conversation!